Facebook’s Woes Persist; Q2 Financial Results Out

In its first public disclosure after the May 18 IPO, social networking company Facebook, Inc. (NASDAQ: FB) on Thursday, July 26, reported financial results for the second quarter, which ended June 30, 2012.

Performance: Dismal.

The company’s second quarter costs and expenses were $1.93 billion, an increase of 295% from the second quarter of 2011. Although Facebook reasons that the increase in costs is driven primarily by share-based compensation expense, its financial performance failed to impress investors.

As a result, its shares went tumbling to a record low and market capitalization has gone from bad to worse. On Thursday, the Facebook shares nosedived to $23.83 in extended trade, from a close of $26.84 on Nasdaq. This fall in share price is almost 35 percent from its $38 price at the time of IPO.

As Facebook bubble seems to be busting, its market capitalization has plummeted to $65 billion from the $100 billion valuation that Facebook fixed for itself in its May IPO.

Revenue for the second quarter totaled $1.18 billion, an increase of 32%, compared with $895 million in the second quarter of 2011. And revenue from advertising was $992 million, representing 84% of total revenue and a 28% increase from the same quarter last year.

However, the costs and expenses that almost tripled during the quarter showed their impact on the company’s financial results. For the second quarter, GAAP loss from operations was $743 million, compared to income from operations of $407 million for the second quarter of 2011.

According to Facebook, monthly active users (MAUs) were 955 million as of June 30, 2012, an increase of 29% year-over-year. Daily active users (DAUs) were 552 million on average for June 2012, an increase of 32% year-over-year. And mobile active users (MAUs) were 543 million as of June 30, 2012, an increase of 67% year-over-year.

These are tall claims from a company that is already headed south. All these claims about the number of users on Facebook are frivolous, as they are based on vague assumptions and can’t be verified accurately.

“Our goal is to help every person stay connected and every product they use be a great social experience,” said Mark Zuckerberg, Facebook founder and CEO. “That’s why we’re so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends.”

Facebook didn’t reveal its perspective for the current quarter and for the future.